JPY Muted Amid BoJ Dovishness

Summary - USDJPY

• Current price: ~142.10
• Trend: Bullish short-term
• Resistance Levels: 142.40, 143.10
• Support Levels: 141.70, 140.80

The pair remains buoyant as the dollar strengthens on improved US-China trade sentiment and expectations that the Fed will maintain a hawkish hold. If bulls push above 142.40, upside targets at 143.10 and 144.00 could come into play. Weakening Japanese fundamentals further support upside bias.

Fundamental Factors Affecting USDJPY

1. Dollar Strengthens on Trade Optimism
   • Trump's comments suggesting potential tariff relief on Chinese goods lifted market sentiment.
   • Though vague, the statement was enough to drive dollar buying as risk appetite improved.
2. Fed Meeting in Focus
   • Investors await today's FOMC meeting, expecting rates to remain unchanged.
   • The tone of Fed Chair Powell's press conference will be key—if he downplays rate cuts or inflation risks, the dollar may rally further.
3. BoJ Remains Dovish
   • BoJ kept interest rates steady at 0.5%, as expected.
   • More importantly, it downgraded GDP and inflation projections, signaling no rate hike in the near term.
   • This divergence with Fed policy keeps the JPY under pressure.
4. Japan's Bank Holiday Limits Activity
   • With Japanese markets closed today, thin liquidity may exaggerate price moves in USDJPY.
   • No major domestic data is expected until later this week.

Key Takeaway for Traders

The USDJPY pair favors further upside, with a bullish dollar, dovish BoJ, and optimistic trade headlines setting the tone. Unless the Fed signals rate cuts or trade talks stall unexpectedly, dollar bulls may continue to dominate.

EURJPY – H4 Timeframe

There has been an evident SBR pattern on the EURJPY 4-hour timeframe chart, with the area of interest falling within the key regions of the Fibonacci retracement tool. However, multiple lower wicks imply the need for caution, as the price can be expected to sweep liquidity from these wicks.

EURJPY – H3 Timeframe

The two immediate wicks pictured on this 3-hour timeframe chart of EURJPY will be the initial inducement area for the primary draw on liquidity, whilst the demand zone near the 88% Fibonacci retracement level serves as the actual focal region.

Analyst's Expectations: 

Direction: Bullish

Target- 164.515

Invalidation- 160.867

CONCLUSION

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